10 things you want to know about the Panama Papers

There is a lot going on with the Panama Papers, here are the 10 things you want to know.

ONE: What are the Panama Papers?

The Panama Papers are a leak of 11.5  million Mossack Fonseca documents from an anonymous source. Journalists all over the world have been investigating the papers and stories they tell for over a year. On 3 April, At 6.48pm, Edward Snowden (the guy who revealed details of classified United States government surveillance programs) sent a Twitter message to his 2 million followers: “The biggest leak in the history of data journalism just went live, and it’s about corruption.” His tweet linked to a german newspaper, Süddeutsche Zeitung’s article headlined “A Storm is Coming”.  Within minutes, The opening stories of the Panama Papers were published simultaneously around the world.

TWO: Who is Mossack Fonseca?

Mossack Fonseca is a Panama-based law firm whose services include incorporating companies in offshore jurisdictions such as the British Virgin Islands. It administers offshore firms for a yearly fee.

THREE: What’s wrong with setting up an offshore business?

Setting up an offshore entity is totally legal.  There are many legitimate reasons for doing so. Business people in less stable countries typically put their assets offshore to defend them from “raids” by criminals, and to get around hard currency restrictions. Others use offshore for reasons of inheritance and estate planning.

BUT because the company structures are anonymous they can be used for money laundering and hiding money or assets gained criminally

FOUR: What are the major revelations and fallouts?

Icelands Prime Minister, Sigmundur Davíð Gunnlaugsson, is the Panama Paper’s biggest casualty so far.   When his wife invested the proceeds of a sale of her father’s business offshore, Gunnlaugsson failed to declare his interest in the company. The company also held bonds in the very same Icelandic banks that the government was responsible for winding up after the Global Financial Crisis.

Gunnlaugsson resigned and his true crime is hypocrisy. Having professed an Iceland-first economic policy of capital controls, retaining businesses in Iceland and protecting the Icelandic króna, it understandably pissed off Iceland to see his own wife utilising global offshoring to – legally – maximise her wealth.

David Cameron is having similar hypocrisy issues  after his father was named in the papers. All evidence suggests that Ian and David Cameron paid all taxes on the dividends they received in Britain from this offshore investment. But the British government has spent the last few years trying to whip up a frenzy about complex tax arrangements. Not a great look.

Vladimir Putin has been linked to secret off shore companies registers in his friend Sergei Roldugin’s  name.  Roldugin has said he is no businessman, but the Panama Papers reveal $2bn flowing from Russian state banks to offshore companies .  The money is cycled back to Russia and  evidence suggests Roldugin is a proxy, with managers at Bank Rossiya in St Petersburg running his affairs.

Putin’s response has been to deny deny deny and state that his opponents are trying to destablise Russia.  Sound familiar?

Many of China’s wealthy are offshore enthusiasts. Eight senior members of China’s Communist party used offshore companies. Others who feature are relatives of the politically powerful.

China’s reaction was predictable. Its censors blocked access to the Panama Papers revelations as they made headlines elsewhere and searches returned no results.

Have a look at Wikipedia and The Guardian for more details country by country

FIVE: Which South Africans have been implicated?

The Panama Papers revealed that two convicted Fidentia members, accountant Maddock and ex-broker Steven Goodwin, used Mossack Fonseca to create offshore companies when Fidentia’s Ponzi scheme was exposed.

Khulubuse Zuma, JZ’s nephew, also features on the list and has been linked to a company that controversially acquired oil fields in the DRC.

SIX: Notable exclusions!

Once the papers were leaked, press and governments scoured them to see who was involved. Notable exclusions were anyone significant from the USA.  Possible explanations include that people in the US favour other offshore locations or that the CIA orchestrated the entire leak.

SEVEN: The Panama Papers should not be about tax

According to Tim Worstall, writing for Forbes, the papers don’t actually bring any significant bad tax stuff to light.  Even though a lot of people are turning the leak into a tax story, it is about so much more: it’s about hiding and secrecy.

EIGHT: Democratic leaders can be held accountable

Gunnlaugsson is the Panama Papers’ biggest casualty so far, and proof that democratic leaders have a tougher time than their authoritarian counterparts.  Protestors and journalists in Russia and China were simply arrested.

NINE: Our patience is thinning

In the wake of the Panama Papers, it appears that the patience of regular citizens is thinning as those in power continue to abide by different rules than the ones they impose on everybody else.

TEN: There is a big divide between the rich and the rest

Only the really wealthy have access to offshore accounts and according to Ed Miliband the Panama Papers have show us that wealth ” ..doesn’t trickle down; it gets stashed.”

The Guardian are covering the Panama Papers intensely and were the source of a lot of information for this post.

Hope this was not too heavy! Have a great weekend!


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